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By Suren Naidoo

Moneyweb: Deputy Editor & Host of the Property Pod

Durban-Umhlanga-Ballito corridor is SA’s fastest growing wealth market

Umhlanga has been the top performing residential market in South Africa over the past 10 years, while Johannesburg and Cape Town have performed relatively poorly.

The Durban-Umhlanga-Ballito corridor is the fastest growing wealth market in South Africa, according to the AfrAsia Bank SA Wealth Report for 2019 which came out on Wednesday.

The 6th edition of the report, published by Johannesburg-based New World Wealth, notes that in the 10-year period from 2008 to 2018 the region’s total wealth rose 25% from $43 billion to $54 billion.

It says the corridor is now home to 3 300 high-net-worth individuals (HNWIs), defined as those with investable assets of $1 million (around R14.1 million) or more.

The area also has 210 multi-millionaires – people with investable assets of at least $10 million (around R141 million).

Despite this growth trend, the region still lags Johannesburg and Cape Town in the stakes of super rich individuals. As SA’s economic hub, Johannesburg has six times as many HNWIs (16 600), while Cape Town has 7 100 – with the Western Cape’s Paarl-Franschhoek-Stellenbosch region highlighted as a separate node in the report with 2 800 HNWIs.

Source: AfrAsia Bank South Africa Wealth Report 2019

“Our research shows that over the last 10 years South Africa’s two main wealth markets, namely Johannesburg and Cape Town, have performed relatively poorly,” says Andrew Amoils, head of research at New World Wealth.

“Johannesburg has lost a large number of HNWIs to other parts of the country while more recently, Cape Town has been harmed by the drought which has hurt the city’s real estate market and deterred migration to the city,” he adds.

On the other hand, the report notes that Umhlanga has been the top performing residential market in South Africa over the past 10 years, with square metre prices in The Pearls luxury apartment complex now reaching similar levels to top apartments in Bantry Bay and Clifton in Cape Town.

“There has also been an uptick in prices in surrounding areas such as Ballito, La Lucia and Zinkwazi, most likely driven by the fact that many local and foreign tourists are now holidaying in northern KwaZulu-Natal due to the negative impact of the drought on Cape Town and the Western Cape,” it adds.

Estate agents have echoed similar sentiments about the property development boom on the North Coast. Carol Reynolds of Pam Golding Properties in Durban says ‘semigration’ to the coastal belt between Durban North and Ballito remains a recurring trend, especially by wealthy “Gautengers” seeking a better lifestyle.

Penthouse apartment fetches R30m

“Durban has won best lifestyle city in South Africa for the past few consecutive years according to the Mercer [2019 Quality of Living] Index, further underlining investor confidence in a province with a highly desirable lifestyle,” says Reynolds. “The Kzn North Coast region continues to attract an influx of home buyers – we recently sold a frontline penthouse apartment at The Pearls in Umhlanga for R30 million.”

According to the AfrAsia report, South Africa is still the largest wealth market in Africa and the 31st largest worldwide with total private wealth held by individuals of approximately $649 billion, of which about 42% or $275 billion is held by HNWIs.

The report notes that although Johannesburg is still the richest city in South Africa with its total wealth valued at $248 billion in 2018, this was only 9% up from a decade earlier when the city’s total wealth was estimated at $228 billion. Cape Town is the next richest city in SA with total wealth of $133 billion last year, 11% up from $120 billion in 2008.

Relatively ‘poor’ performance

“In some ways, the relatively poor performance of South Africa’s two main wealth markets mirrors the performance of its overall economy, which underperformed over the last decade, with World Bank data showing gross domestic product [GDP] per capita in dollar terms rising just 7% from $5 700 in 2008 to $6 100 in 2018, but down from a peak of $7 900 in 2011,” Mauritius-based AfrAsia Bank said in a statement.

The bank considers wealth to be a far better measure of the financial health of an economy than GDP.

“GDP is quite a static measure – it tends to only move slightly year on year,” says Ravi Teji, head of business development in Africa for AfrAsia Bank. “As a result, it is not a great gauge of the performance of an economy. The trouble with using GDP to measure the health of the economy is that a large portion of economic output often flows to the government, particularly in developing countries, resulting in little impact on the financial wealth of private citizens. GDP also counts items multiple times.”

He adds: “GDP also ignores the efficiency of the local banking sector as well as the impact of property prices and the stock market, both of which obviously have a big impact on private wealth.”

A day after the release of the AfrAsia Bank study, Bloomberg reported of South Africa’s economy being “stuck in its longest downward cycle since 1945”.

Citing the South African Reserve Bank’s Quarterly Bulletin released on Thursday, Bloomberg stated that the economy entered its 67th month of a weakening cycle in June. It noted that this added to the risk that South Africa may fall into its second recession in a year.

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